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Tuesday, 23 April 2013

Merck Canada Inc and another v Sigma Pharmaceuticals plc[2013] EWCA Civ 326is yet another SPC-flavoured case to go to the Court of Justice of the European Union (CJEU) -- but it's quite different from the rest. It involves the "Specific Mechanism".

In short, in 2004 a number of new Member States (the 'accession states') joined the European
Union. Some of those states had not historically permitted the patenting of pharmaceutical products. By 2004, such patents were
permitted, but there remained a number of cases where patents or supplementary protection certificates had been granted in other Member States for pharmaceutical products at a time when no such protection had been
available in one or more of the accession states. Accordingly, a special
derogation from the normal free movement rules was negotiated as part of the
accession arrangements.

This derogation, known as the 'Specific Mechanism', was appended to the Act of Accession. It permitted the owner of a pharma patent or SPC to prevent the parallel importation of the patented product from
one of the accession states if, at the time of filing, such protection was unavailable in that accession state. It also anyone who intended to import such a product to demonstrate to the relevant national
authority that he had given notice of that intention to the holder or
beneficiary of the protection.

Merck Canada, which was incorporated in
Canada, was the registered proprietor of apatent and SPC
for montelukast sodium, an active
ingredient in a product called 'Singulair'. The second claimant, Merck Sharp Dohme, was a UK company and its exclusive licensee. Merck filed for protection when montelukast sodium could not be patented in Poland.

Sigma, a
parallel importer of pharma products into the United Kingdom. In June
2009 Pharma XL, an associated company of Sigma that was responsible for
applying for parallel import authorisations for the Sigma group of
companies, sent a letter to Merck Sharp Dohme which stated that it intended to
import Singulair into the UK from Poland. This letter referred to the Specific Mechanism and asked whether there were any objections to importation. Merck Sharp Dohme did not respond. In September 2009 PXL
applied to the Medicines and Health Regulatory Agency (MHRA) for parallel
importation licences. This application required confirmation that either
the Specific Mechanism did not apply or that one months’ prior notification had
been given to the patent holder. Pharma XL indicated that one months’ notice had been
given. In May 2010 the MHRA granted Pharma XL a licence in respect of the 5mg dose
of Singulair. In June and July, Pharma XL wrote to Merck Sharp Dohme, saying it planned to import Singulair from Poland and enclosed copies of the intended
representation of the repackaged products. Again Merck Sharp Dohme did not respond, so Sigma began to import 5mg Singulair.
In September, Pharma XL was granted a second licence in respect of the 10mg dose. Pharma XL
wrote two further notification letters to Merck Sharp Dohme in respect of the
10mg dosage, but again there was no response, so Sigma began to import the 10mg form of Singulair too.

In December, Merck Canada wrote to Pharma XL objecting to the importation of Singulair under the
specific mechanism and asserting that its
patent had been infringed. Sigma stopped its activity, but Merck Canada nonetheless sued for infringement of both the patent and the SPC.

Sigma's
primary defence was that the Specific Mechanism merely conferred upon a patent
holder the option of preventing imports: the
derogating provisions were inapplicable unless and until the patent holder
demonstrated his intention to exercise that option -- which did not happen till December
2010. In any event, having failed to respond to the letters from Pharma XL, Merck Canada was estopped from asserting its rights.

When the case came before the Patents County Court, Judge Birss QC rejected both these defences. In his view, the Specific Mechanism did not require the patent holder
to demonstrate his intention to oppose importation before that activity was
rendered an infringement -- and he declined to refer any issue concerning the
proper interpretation of the Specific Mechanism to the CJEU. Also, he found on the facts that Merck Canada was not estopped from relying on its patent rights. He granted an
injunction and ordered Sigma to deliver up its unsold
stocks of Singular. Sigma appealed.

The Court of Appeal for England and Wales (Lord Justice Patten, Lady Justice Black and Lord Justice Kitchin) upheld the trial judge's decision relating to estoppel: this was because there was no
suggestion that Merck Canada had been, or ought to have been, aware of Sigma's existing state of mind and, in particular, the misunderstanding
which Sigma had already formed as to Merck Canada's attitude to the
importation of patented pharmaceutical products from Poland. There was no pre-existing relationship, contractual or otherwise, that could have imposed a duty on Merck to respond to Pharma XL's letters and Merck Canada had not acted unconscionably in delaying its decision to bring proceedings within the legal time limit.

The Court of Appeal also agreed that Judge Birss QC was right to
make the order for delivery up, on the basis that his finding
of infringement had been correct.

However, this action raised three groups of questions
that concerned the proper interpretation of the specific mechanism. These had
to be answered by the CJEU before the Court of Appeal could decide the appeal. As Lord Justice Kitchin, giving judgment for the Court, explained:

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